A spit in the face of Free Trade? In retaliation to comments on Kashmir, made by an unapologetic Prime Minister Tun Dr Mahathir Mohamad during the 74th United Nations General Assembly, India banned the importing of refined palm oils from Malaysia. As a consequence of India’s amended trade policy, it may be expected that an initial round of Cost-Push Inflation (CPI) and an increase in Food-Based Inflation (FBI) will hit the country.
India imports 70% of its edible oils: soya, rapeseed and palm. Palm oil leads the pack with a 40% stake, of which, 95% were imported from Malaysia and Indonesia. This once made India Malaysia’s largest destination for refined palm oil.
Prior, Malaysia managed to beat out the customary primary exporter of Crude Palm Oil (CPO), Indonesia, because of a duty levied on CPOs by India. With the recent easing of CPO duties and the ban on refined palm oils, Indonesia will capitalize on the situation and rise to overtake Malaysia as India’s largest exporter of edible oil.
India is likely to not leave this move unscathed, as the nation has to play industry catch up in order for local refineries to keep pace with demand.
Although most Indian refiners rejoice a tune of praise at the opportunity for higher production, after losing out to the cheaper imported refined oils for years, there are doubts on whether the industry can take such an increase in production so quickly without incurring too many added costs. With India being the largest users of palm oil “capturing over 20 percent of global supply” (World Wildlife Federation 2019, para. 1), the effect of change will be felt.
As an example of how change could manifest, look to the issue that has plagued India in this decade: Food-Based Inflation.
The price of food in India rose 10.01 percent in November of 2019, tailing a 7.89 percent increase in the month prior, reaching the highest level since December of 2013 (Trading Economics 2020). This issue is as relevant to India’s national security as it was nearly a decade ago.
Furthermore, the increase in prices for CPOs and other alternatives, coupled with other supply-based fluctuations, will only assist in increasing India’s Food inflation. Rising food prices are generally temporal and will decrease over time. Alas, even temporary periods of fluctuating prices can result in extensive hardship to those on the poverty line.
Currently there have been no comments by both nations on their worsening bilateral relationship. Sadly, the future of free trade among these neighbouring Asian nations seems to be on shaky ground. Prime Minister Mahathir Mohamad is torn by the PH government’s unshaken support for the commodity and his stance on the ‘Kashmir’ issue, while Indian Prime Minister Narendra Modi, remains unmoved, in the foreseeable future, to be putting nationalistic policy before people.
Danial is a final year undergraduate majoring in International Studies Global Security at the Royal Melbourne Institute of Technology, currently on a research attachment with the Crisis Management Centre in Malaysia.
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